This year is shaping up as yet another record-breakerin the glittering history of Dubai Duty Free. By theend of October the retailer had already racked up sales

of US$549 million, and was closing in on the US$590 mil-lion in sales it achieved in the full year 2005. At that rate,the company is on track to hit its target of US$690 millionin 2006, and may even come close to US$700 million.

Managing Director Colm McLoughlin says the US$1 bil-lion mark is now in sight, but he’s also ensuring that thecompany is well positioned to meet the challenge ofgrowth. “At the current rate of progress we should hit US$1billion in sales by about 2009,” he says. “But we need to putin place the right infrastructure to manage that kind ofincrease. By next May we’ll have a new 27,000sq m ware-house and office complex, and an automated logistics cen-tre, which we don’t have now. That means we can streamlinethe delivery of goods to the shop floor and be more efficientas a business.”

It also means investing in a key resource: staff. “We currentlyhave 1,600 people employed, from 35 nationalities,” saysMcLoughlin. “We think we’ll need at least 2,500 based onthe rate of growth in the next few years.”

That tremendous growth is being fuelled by the surgingpopularity of Dubai as a destination, both for business andfor leisure. “Business is booming,” says an upbeatMcLoughlin. “There are new theme parks, golf courses andhotel complexes coming into play all the time. It’s a greatstory.” And Dubai Duty Free, which has long since cementedits own place in that story, has big plans of its own. It alreadymanages a tennis stadium and Dubai’s Aviation Club, butnow it is talking to planners about developing its ownfive-star hotel.

“We have opened our own branded spa at the AviationClub,” says McLoughlin. “Now the next step will be a 230-bedroom hotel at the same location. That’s a very excitingproject for us.”

Almost as exciting, perhaps, as the developments in Dubai’saviation market, which will propel Dubai Duty Free to a newlevel in the years to come. Within the next three years theretailer will expand its retail floor space from 7,000sq m toover 20,000sq m.

At Dubai International Airport a US$4.1 billion expansionwill see the construction of the new Emirates-dedicated

terminal and Concourse 2 and 3. In the first phase next yearConcourse 2 will open, and Dubai Duty Free will add8,500sq m of space in the 940m-long terminal. The storeshave been designed by a partnership between CIL and StuartCaddick of Retail Concepts.

Dubai Duty FreeNovember 2006 MEDFA OFFICIAL GUIDE 2006

The rise of Dubai Duty Free continues apace. Within the next three years the retailer will increase itsretail space from 7,000sq m to over 20,000sq m amid huge investment in Dubai’s airport market. AndManaging Director Colm McLoughlin says annual sales of US$1 billion are just three years away.

Colm McLoughlin: Overseeing a range of projects designed todrive Dubai Duty Free towards US$1 billion in annual sales

Dubai Duty Free sets sightson US$1 billion in sales

The Moodie Report 43

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The area will feature two Arrivals shops – one the same sizeas the existing Sheikh Rashid outlet and the other twice aslarge – as well as an extensive landside retail offer. TheDepartures offer will be similar to the Sheikh Rashid layout,with the anchor stores lining each side of the walkway plus18 centre units. The key food and liquor/tobacco stores willbe duplicated because of the length of the terminal.

By the end of 2007 the retailer will take control of over3,000sq m of new space at Jebel Ali Airport, and in 2009,when Concourse 3 is complete, there will be a further5,000sq m on offer at Dubai International.

The Jebel Ali project marks the first phase in the creation ofthe US$33 billion Dubai World Central International Airport,which will eventually have capacity for 120 million passengers.“The forecasts are for huge growth,” says McLoughlin, “butthey are on track. From 28 million passengers this year weexpect to hit 60 million by 2010 and then capacity – 70 mil-lion – by 2012. It’s not just Dubai Duty Free; Emirates hasUS$30 billion of aircraft on order. So all of that new airportinfrastructure will be needed, and must be in planning now.”

Core businessYet while plans for the future are being drawn up, there isstill a day-to-day business to be managed at Dubai Airport’sSheikh Rashid Terminal and in Terminal Two. In T2 theshops catering to the general public have been renovated,while Arrivals there has been expanded from 35sq m to 106sqm. In the main Departures terminal the fashion departmenthas been refitted and space for a new lounge assigned to easecongestion. Also during 2006 the company opened a new‘Household’ shop, incorporating soft furnishings and homeappliances. “The Household shop is a new direction – webelieve there is a demand for this category,” McLoughlinsays. “We have also redesigned the Precious Stones shop andbuilt a new Gadget shop, both of which are doing well.”

The key electronics area also benefited from a revamp, andnow includes a ‘Sound & Vision and Games’ area, a new cam-corder area and a new music shop. The retailer has alsoopened a pharmacy and its own bureau de change, which isperforming well, says McLoughlin.

While these ancillary activities add value to the business, thecore remains the traditional duty free categories. From 1January to 31 October this year, sales have grown by +18.2%compared to the same period last year, driven by the classicduty free sectors of fragrances, cosmetics, liquor and con-fectionery. Fragrance sales (at US$75.5 million in the firstten months) rose by +25.7% in the period, while cosmetics(at US$26.7 million) is the fastest growing category so farthis year, up +40.8%. Liquor sales have grown by +20% toUS$71.4 million, and confectionery is up +21.2% to sales ofUS$37.2 million. Among the other powerful contributors,gold rose +16.4% to US$58.5 million, while electronics rose+8.9% to US$53.5 million.

Record totalsThe surge towards US$700 million in annual sales is beingaided by some tremendous daily performances. On 20 Octo-ber Dubai Duty Free achieved its highest daily sales in 2006when it took Dhs9.74 million (US$2.7 million) in revenues

Dubai Duty FreeNovember 2006 MEDFA OFFICIAL GUIDE 2006

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Teeing up for a new growth phase: staff numbers at Dubai DutyFree will increase from 1,600 to 2,500 in coming years

Dubai Duty FreeMEDFA OFFICIAL GUIDE 2006 November 2006

46 The Moodie Report

during the festivals of Diwali and Eid. With 54,506 trans-actions made on the day, sales at the operation were only everhigher on the anniversary days of 20 December 2005(US$4.9 million and 61,515 transactions) and on 20December 2004 (US$3.1 million in sales).

The results in the year to date haven’t come without someturbulence in the market, particularly after the UK terroralert of 10 August forced overnight changes to hand baggagerules. Dubai Airport wasn’t immune; Emirates flights to theUS and all Air India flights had restrictions on liquid and gelsbeing carried on board, and for a few weeks the retailercouldn’t serve certain goods at all to Air India passengers, acrucial segment of the customer base.

“There was a period when we couldn’t sell to Air Indiaflights, and we lost Dhs50–60,000 (US$15–17,000) a day dur-ing that time,” says McLoughlin. “Eventually we wereallowed to belly-load those flights.”

The ever-positive McLoughlin’s attitude to this mini-crisisis instructive. “Faced with that kind of problem, you just haveto capture the opportunities that arise. Our Arrivals businesswas one opportunity. Sales have risen a lot since August,although spend per head at US$7 is still dwarfed by theUS$42 per head we get in Departures. The total businesswasn’t affected, even during August. Sales at Dubai Duty Freerose +25.9% year-on-year in that month.”

The retailer’s positive thinking will be tested in the comingweeks and months, after new European Union security ruleskicked in from 6 November. EU-bound passengers depart-ing Dubai, but who transit at an EU airport, face having theirduty free liquids over 100ml being seized at security in thetransit airport.

Up to 8,000 Emirates passengers who transit within the EUcould be affected, Dubai Duty Free estimates. But the com-pany has already reacted by offering a ‘belly load’ system fortransit passengers.

Dubai Duty Free IT and Logistics Director RameshCidambi says: “For transit passengers, Dubai Duty Free hasrequested Emirates and the other carriers using the airportto advise the transit passengers both of the new regulationsand a new service being provided by DDF on the shop-floor.

Above: The Household shop is “a new direction” for the retailer,says Managing Director Colm McLoughlin, while (below) a newGadget shop is driving sales in an emerging category

Source: Dubai Duty Free

Category Sales (Dhs) Sales (US$) Change on yearLiquor 256,935,625 71,371,007 +20.0%Cigarettes, tobacco, cigars 162,495,106 45,137,529 +15.3%Electronics 192,710,106 53,530,585 +8.9%Watches & clocks 109,146,134 30,318,371 +18.4%Gold 210,697,291 58,527,025 +16.4%Perfumes 271,840,868 75,511,352 +25.7%Cosmetics 96,055,000 26,681,944 +40.8%Handbags and small leather goods 11,388,321 3,163,423 +18.8%Confectionery 133,933,853 37,203,848 +21.2%Total sales for year to date 1,977,534,707 549,315,196 +18.2%

Dubai Duty Free sales breakdown by category for the year to 31 October 2006

“This service comprises a customer service desk in which thepurchases made by the transit passengers will be packedand placed in a bag that is suitable for ‘belly-loading’ intothe aircraft.

“The passenger will hand over the bag to the airline staff atthe gate, and the airline will belly-load the bag and tag it tothe final destination. Of course, the airlines decide whetherto belly-load or not, but DDF is confident that most of theairlines using Dubai Airport will assist the passengers by pro-viding this facility.”

Although the outcome was uncertain as this edition went topress – just as the new rules were being enforced – DubaiDuty Free is optimistic that it can minimise any potentiallosses.

There’s that positive thinking again – thinking that goes tothe heart of the company’s approach to business.

Crises come and go, but a strong commercial ethos – backedby good people and sustained investment – are powerfulcounter-measures. And if the power of positive thinking hasany effect, don’t be surprised to see that US$700 millionbarrier broken before the year is out. �

Trend-setter: Dubai Duty Free’s fashion department in the main Departures terminal has been refitted, resulting in double-digit growth

Sitting pretty: Cosmetics was the fastest growing category in thefirst ten months of the year, rising by over +40% in value

Dubai Duty FreeNovember 2006 MEDFA OFFICIAL GUIDE 2006

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